USDA GAIN: Livestock and Products

USDA GAIN: Brazil Livestock and Products Annual 2012

Post forecasts beef and pork production to increase by over two percent in 2013 supported mostly by strong international
demand. The devaluation of the Brazilian currency in 2012 will improve the competitiveness of Brazilian product in
overseas markets, but sluggish domestic demand will moderate consumption. In addition, consumption of animal protein in
Brazil is facing a new constraint that combines higher retail prices of meats due to higher costs of production and high
indebtedness of Brazilian consumers. As shown by recent data, debt payments eat up over 46 percent of the household
income in Brazil.

Animal Numbers, Cattle

Production:

Post forecasts an increase of three percent in cattle inventories in 2013, mostly due to government
financial support for cattle herd rebuilding, genetic improvements, upgrades in pasture land, and
sustained cattle prices. Thus, cattle inventories are expected to reach nearly 210 million head by the end
of the year.

The recently announced Crop and Livestock Plan for the 2012-13 marketing year (Oct 1, 2012-
September 30, 2013) provides a total of R$ 115.2 billion (US$ 58 billion), at subsidized interest rates
allocated for commercial and export-oriented agriculture, including R$ 750,000 (US$ 375,000), per
cattle producer for pasture renovation and herd rebuilding through genetic improvement. The program
requires a five-year payment with a18 month grace period. In addition, large beef packers are also
increasing financing for their cattle suppliers, similar to the financing available for the chicken and pork
production integration system. In addition, cattle producers can benefit from the Low Carbon
Agriculture Program (ABC), with a subsidized interest rate of 5.5 percent per year, to implement the
integration of crop-livestock-forest program (iLPF). Although in its initial stage, this program offers a
sustainable opportunity for renovation of poor pastures in Brazil, estimated at 90 million hectares, with
a significant long term impact on beef production.

Trade:

Post forecasts an increase of 20 percent in cattle exports during 2013 due mostly to higher exports to Venezuela and competitive cattle prices from Brazil. The Brazilian Meat Packing Industry officially submitted to the federal government on January 31, 2012, a request for a 30 percent export tax on live cattle exports, but the government has not taken a decision on this issue.

Meat, Beef and Veal

Production:

Post forecasts that beef production will increase 2.5 percent in 2013 due mostly to international demand and a small increase in domestic demand. The devaluation of the Brazilian currency combined with higher cattle supplies is likely to maintain Brazilian beef at competitive prices in world markets in 2013. Profit margins for processors are forecast to improve due to higher availability of cattle supplies and improved competitiveness of Brazilian meat overseas due to the devaluation of the Brazilian currency by over 10 percent in 2012.

Trade:

Post projects an increase of beef exports of eight percent or more in 2013, as Brazilian beef exporters are optimistic about recovering exports to the Russian Federation, despite the slow re-listing process of Brazilian plants. Post also anticipates shipments to other markets such as Egypt, China, Chile, Cuba, Iraq, and Morocco. Despite the financial crisis in the European Union (EU), exporters also expect to increase exports to that market because more Brazilian cattle farms are enrolled in the EU’s traceability program due to the flexibility in the Normative Instruction # 61 allowed by the European Union. In addition, Post also expects a continued recovery in processed beef exports to the United States. Trade sources also posit that the devaluation of the Brazilian currency and stable cattle prices due to higher supplies of animals for slaughter will improve the competitiveness of Brazilian beef overseas.

Policy:

According to trade sources, officials from the Russian Federation are threatening to ban imports of Brazilian meat exports due to the use of Ractopamine. However, Brazilian officials have not received any official note from the government of the Russian Federation concerning this possibility.

Also, the EU is threatening to restrict Brazilian meat exports due to the approval by the Brazilian government of zilparetol and ractopamine. The GOB is elaborating a segregation plan to present to the EU officials. In the meantime, the GOB has entered into an agreement with the two U.S. companies producing those additives to refrain from selling these products in the Brazilian market until the plan is executed.

Meat, Swine

Production:

Post forecasts pig production to increase by one percent in 2013 supported mostly by international demand. Post’s forecast reflects current concerns of swine producers with the uncertainties regarding the higher feed costs. Despite the government programs of subsidized corn sales, independent producers are expected to suffer most from the increase in their cost of production.

Swine producers in the most important producing areas have asked and received from state governments an exemption on the state sales tax on energy as a means to alleviate their current problems derived from the increase in production costs. Swine producers also have requested and obtained from the government an extended grace period for their debts from production credit loans during 2011/2012.

Meat, Pork

Production

Post forecasts pork production in 2013 to increase by nearly two percent. This forecast reflects the current optimism of the pork industry with a continued recovery in export markets. However, a major factor of concern for hog producers is the recent increase in feed prices, mostly corn-based feed. According to the association of pork producers the increase in corn prices could squeeze their margins, although the GOB has already intervened in the market with subsidized corn auctions to protect the industry, has extended deadlines for credit payments, and has temporarily suspended state taxes.

Trade:

Post forecasts pork exports to increase by seven percent or more in 2013. Post’s forecast reflects current optimism of Brazilian exporters with the devaluation of the Brazilian currency and firm demand from major importers, mostly Hong Kong, Ukraine, Angola, Argentina and Singapore. Brazilian pork exporters are also strategically focused on two new markets: China and Japan. The first pork shipments to China occurred in January 2012 and totaled 52 metric tons. Trade sources believe that exports to China will only be significant in 2013.

Pork exports to Japan. After five years, on August 27, 2012 the Ministry of Agriculture, Fisheries and Forestry of Japan concluded the risk analysis for Brazilian pork imports from the state of Santa Catarina. The two countries still need to negotiate the requirements for the international health certificate (CSI, in Portuguese) and plant approvals. Japanese officials believe that within 60 days the process could be completed, but Brazilian trade sources believe that the process will not be completed until early next year. In fact, only in late November will a team from Japan visit the state of Santa Catarina. The current forecast for pork exports to Japan after the final approval of all requirements varies from 10 to 15 percent of Japan imports estimated at 1.2 million metric tons, or 120,000 to 180,000 metric tons of Brazilian pork per year. However, more realistic estimates by some trade sources concluded that in 2013 Brazil could export two to three percent to Japan (between 24,000 and 36,000 metric tons) and in the near future, could increase exports to ten percent (120,000 metric tons).